New Juniper CEO Lays Out Restructuring, Cost-Cutting Plan

Responding to mounting shareholder pressure to cut costs and reevaluate its product line, Juniper Networks unveiled Thursday its "integrated operating plan" (IOP), which the company says will help it save $160 million by the first quarter of 2015 and refocus its efforts around cloud and "highly intelligent" networks.

"This plan is focused on accelerating growth and increasing shareholder value, and ties together all the different aspects of how we are going to operate in 2014 and beyond," said Juniper CEO Shaygan Kheradpir on a conference call with analysts Thursday.

The company also announced a shake-up to its board, including the nomination of Kevin DeNuccio, former president and CEO of Redback Networks, and Gary Daichendt, a former Cisco executive, as new independent directors. Former Juniper CEO Kevin Johnson is also stepping down from the board by the end of the month.

Kheradpir, who started as Juniper CEO on Jan. 1, first hinted at Juniper's IOP during the company's fourth-quarter earnings call in January. The plan is largely in response to ongoing pressure from hedge-fund and Juniper investor Elliott Management, which filed a report with the U.S. Securities and Exchange Commission in January, urging Juniper to reduce operating expenses, reevaluate its product portfolio and scale back on R&D spend.

Days later, fellow hedge-fund and Juniper investor Jana Partners also urged Juniper to tighten its belt and strive to save $300 million this year.

The IOP plan, according to Juniper, is four-pronged. First, Juniper is aiming to grow its operating margins and cut costs, with the aim of exiting the first quarter of 2015 with operating expense savings of $160 million. The company also seeks to achieve an operating margin of 25 percent for 2015, which would represent a 5.8 percentage point jump over 2013.

Juniper said it has established a Cost Control Committee, led by Kheradpir, to ensure costs are scaled back in an "accountable and efficient" manner. Juniper also has on-boarded the help of consultant group McKinsey & Company.

Juniper did not say whether the cuts would specifically involve layoffs. Kheradpir did say on the conference call, however, that Juniper is looking to simplify its organizational structure and "reduce management layers" within the company.

Second, Juniper's IOP is meant to streamline operations and the company's business portfolio. Details at this point are scant, but Juniper said it has undergone a "comprehensive evaluation" of its product family.

In its filing last month, Elliott Management specifically suggested Juniper reevaluate its enterprise switching and security portfolios, both of which it viewed as underperforming.

Third, Juniper said IOP is aimed at leveraging the company's "engineering expertise" across its routing, switching, security, control and network management portfolios, breaking down silos between those groups, and focusing on creating what Kheradpir has dubbed "High-IQ" networks for cloud providers.

At Juniper's Global Partner Conference in January, Kheradpir said Juniper's "grand opportunity" moving forward would be building out advanced, hybrid cloud ecosystems -- or "high IQ" -- networks for its enterprise and service provider customers.

Finally, Juniper detailed a capital allocation plan as part of its IOP, with the aim of returning a minimum of $3 billion to shareholders over the next three years. To that end, Juniper said its board has already authorized a $2 billion share buyback plan, which includes a $1.2 billion accelerated buyback plan.

Juniper said it will provide updates on its IOP and cost-cutting measures on a quarterly basis.

Juniper shares were up almost 2 percent after the market closed Thursday.

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